Hart Computer Company has been purchasing carrying cases for its portable computers at a delivered cost of
Question:
Hart Computer Company has been purchasing carrying cases for its portable computers at a delivered cost of $69 per unit. The company, which it currently operating below full capacity charges factory overhead to production at the rate of 35% of direct labor cost. The fully absorbed unit costs to produce comparable carrying cases are expected to be:
Direct Materials25
Direct Labor32
Factory overhead
(35% of direct labor)11.2
Total Cost per unit68.2
If Hart Computer Company manufactures the carrying cases, fixed factory overhead costs will not increase and variable factory overhead costs associated with the cases are expected to be 25% of the direct labor costs.Prepare a differential analysis report, dated June 5, 2008, for the make or buy decision.
Step by Step Answer:
Accounting
ISBN: 978-0324401844
22nd Edition
Authors: Carl S. Warren, James M. Reeve, Jonathan E. Duchac